Todd Bolsius is frustrated with the investment choices in his 403(b) plan, a type of retirement-savings plan commonly used by schools, hospitals, charities and other nonprofit organizations.

"All of my money is in an AIG annuity," says Todd, vice-principal of an elementary school in New Jersey. "I recently found out that there are hidden fees in this account on top of the 1.8% I am already paying" for a managed-portfolio option inside the annuity. Those total fees could take an enormous toll on his long-term retirement savings.

Bolsius would rather invest for the long haul in a low-cost mutual fund with a provider such as Vanguard, which manages his Roth IRA. Fees for Vanguard's target-date funds are a mere 0.19%, one-tenth of what he is paying for his annuity.

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Minimize costs. Thanks to a generous pension, Todd is in a healthier position than most folks when it comes to preparing for retirement. Dan Keady, director of financial planning for TIAA-CREF, which specializes in investment services for 403(b) plan participants, suggests that Todd stop funding his costly 403(b) plan and shift his contributions to his Roth IRA.

Individuals with incomes of less than $116,000 and married couples with incomes of less than $169,000 can contribute up to $5,000 to a Roth IRA this year. That's nearly as much as Todd had been contributing annually to his 403(b) plan. Although a Roth IRA offers no upfront tax breaks, all the money withdrawn in retirement will be tax-free. "That will give him tax diversification down the road," says Keady.

Should Todd have any additional money to invest, Keady recommends that he fund a tax-deductible IRA for his wife, Monique, who is a stay-at-home mother of two. That would restore some or all of the tax breaks he would lose by not funding his 403(b) plan and boost their overall savings.

Tighter rules. Todd would also like to transfer his 403(b) balance to a low-cost financial provider outside his plan. Some 403(b) plans allowed this type of escape hatch in the past. But these so-called 90-24 transfers are severely restricted under new IRS rules.

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Transfers made after September 24, 2007, are permitted only if the financial institution receiving the funds agrees to share information about plan participants with the employer, such as any requests for loans and hardship withdrawals.

The new rules are causing some record-keeping problems. "It becomes a nightmare to administer individual agreements, and many mutual funds don't want to deal with it," says Scott Dauenhauer, a financial planner with Meridian Wealth Management, in Murrieta, Cal.

Starting next year, 403(b) sponsors will be required to draw up written agreements, including information-sharing provisions, with all approved vendors. Dauenhauer, who specializes in advising schoolteachers, predicts that many 403(b) plans will end up with even fewer investment choices as some mutual funds abandon the retirement-plan market for nonprofits.